The Mortgage Corner
Existing-home sales increased in October after six straight months of decreases, according to the National Association of Realtors. Three of four major U.S. regions saw gains in sales activity last month.
Lawrence Yun, NAR’s chief economist, says increasing housing inventory has brought more buyers to the market. “After six consecutive months of decline, buyers are finally stepping back into the housing market,” he said. “Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.”
It’s really been almost a year (November 2017) since sales last peaked. And that was when interest rates had dipped to 4.0 percent for 30-year conforming fixed rates. So it is further evidence that sales are interest-rate sensitive, and homebuyers will wait for a dip in mortgage rates.
Today’s benchmark 10-year T Bond has fallen back to 3.06 percent, for instance, and the 30-year conforming fixed rate to 4.375 percent for those with the best credit scores.
It’s another manifestation of the flight to quality from a very unstable stock market worried about trade wars and outright wars, as the Trump administration stirs up the domestic and geopolitical temperatures again. Unilateral withdrawals from trade and Intermediate Nuclear Missile treaties do not hearten confidence this administration is interested in keeping the peace.
“Total existing-home sales, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million in October. Sales are now down 5.1 percent from a year ago (5.5 million in October 2017), said the NAR.
This may be due to increased inventories of homes for sale, as Yun said. Buying has slowed, but new-home building has increased. Total housing inventory at the end of October decreased from 1.88 million in September to 1.85 million existing homes available for sale, but that represents an increase from 1.80 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, down from 4.4 last month and up from 3.9 months a year ago.
Meanwhile nationwide housing starts rose 13.7 percent in October to a seasonally adjusted annual rate of 1.29 million units after a slight upward revision to the September reading, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. This is the highest housing production reading since October 2016, when total starts hit a post-recession high of 1.33 million.
“We are seeing solid, steady production growth that is consistent with the National Association of Homebuilders forecast for continued strengthening of the single-family sector,” said NAHB Chief Economist Robert Dietz. “As the job market and overall economy continue to firm, we should see demand for housing increase as we head into 2018.”
Single-family production rose 5.3 percent in October to a seasonally adjusted annual rate of 877,000. Year-to-date, single-family starts are 8.4 percent above their level over the same period last year. Multifamily starts jumped 36.8 percent to 413,000 units after a weak September report.
Hurricane Michael hit Florida and Georgia in October though existing-home sales in the South nevertheless managed a 1.9 percent monthly rise. Sales in the West were strongest at plus 2.8 percent with the Northeast at plus 1.5 percent but the Midwest at minus 0.8 percent.
“Sales may have gotten a boost from discounting as the median price fell 0.6 percent to $255,400, said Econoday. “Year-on-year, the median is up 3.8 percent which is sizably above the decline in sales which points to further discounting ahead.”
More price discounting and lower (not higher) interest rates and inflation may lie ahead, as real estate becomes the more dependable asset in such times of uncertainty.
Harlan Green © 2018
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